Starbucks: $2 Special
I've been meaning to post something on this for a while, but today's "discount" finally did it for me.
As you may have heard, Starbucks has canned their DVDs and CDs. At a recent visit, I picked up Juno (which I have been meaning to see), and for Mrs. Big Picture I grabbed The Kite Runner -- for $7.95 each. They also had the new James Hunter CD (Official site, Amazon, NPR interview) and the latest John Mellencamp disc (Official site, Amazon) were also $8.
But the big thing that caught my eye was their $2 special. Bring your receipt in from any purchase in the am, and after 2pm any Grande Cold drink is just $2.
Value maximizers may want to go for the Iced Frappucino Double Chocolaty Chip Frappuccino Crème at $4.80 but it weighs in at 510 calories. Or, the Java Chip Frappuccino is 460 calories. I went for the Iced Caramel Macchiato, which cost less, but is practically dietetic at 230 calories.
~~~
I cannot recall Starbucks being this promotional since . . . well, ever.
Anyone else raising their promotions to move some product ?
Tuesday, August 12, 2008 | 02:30 PM | Permalink
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What is really on special is Starbucks stock. I know you don't like to buy a stock that has been going down but the value is very compelling now. The decision to close hundreds of stores, given the number of unprofitable ones they have, should be positive for earnings in 2009 and beyond.
Posted by: Rubens Morse | Aug 12, 2008 3:01:10 PM
I went to Stop and Shop last week...had a coupon for Mitchum deodorant that I use. It's expensive, but doesn't cash rashes. I like to stock up...they don't go bad. I bought two and when I paid, they printed a coupon for me to save $1 on my next purchase of Mitchum. So I immediately went back in and bought another one. I paid and guess what...another coupon for Mitchum printed out. The more I bought, the more coupons I got.
Posted by: Steve Barry | Aug 12, 2008 3:02:11 PM
Caramel Macchiato, my favorite hot or cold, if only they had some promos in the UK. That said, I have yet to walk into a starbucks in London and not have to queue. Although, it is a lot easier to eat in these days.
Posted by: Gavin | Aug 12, 2008 3:05:19 PM
Well Citigroup just priced a 5 year issue at +350 over treasuries. That is about 50bp over where similar issues were trading this morning.
And WFC priced their prefereds at 8 5/8% for 600mil..
What kind of asset do you buy to make the carry work with those rates?
Posted by: Vermont Trader | Aug 12, 2008 3:15:15 PM
Do you realize there is an arbitrage situation because of this...
http://www.amybergquist.com/blog/2008/08/05/starbucks-arbitrage/
Posted by: AmyBergquist | Aug 12, 2008 3:19:11 PM
I don't think that is arbitrage...it's just selling a benefit to someone else.
Posted by: Steve Barry | Aug 12, 2008 3:23:57 PM
Why in the world would you go long SBUX now? Revenue growth slowing, margins contracting, and they just took on $550mm in debt that they have to service every year. Signs of desperation aren't comforting either. Everyone in NYC and London spout about SBUX being full all the time, but thats because coffee everywhere in both those cities is abnormally expensive.
SBUX could be in for a meeting with the bankruptcy fairy, and while I'm pretty confident they will come out of bankruptcy pretty strong, their equity holders won't.
Posted by: Danny | Aug 12, 2008 3:26:48 PM
At the current dollar index, multi-national companies will lose all the 4th qtr boost they usually get from a weaker dollar...4th qtr is the big qtr for tech sales.
Posted by: Steve Barry | Aug 12, 2008 3:28:44 PM
Starbux overbuilt...like CVS...my mid-sze city has 3 CVS's within reasonable walking distance.
Posted by: Steve Barry | Aug 12, 2008 3:30:37 PM
I can't imagine anyone who likes coffee drinking it other than black (straight no chaser) Then, purchasing specialty roasted beans from a small roaster - and finally putting it in a $2000 maker. Since water is essential to the taste - a mountain brook in upstate NY will do (it has been acclaimed some of the best water in the USA.)
Now...Starbucks - Black coffee - is just about the worst tasting coffee in my most recent history (66 years) and...where does their water come from? So, take their coffee and take out the taste by making a hot milkshake - where is that at?
BTW - a good beer is 1554 by the makers of Fat Tire - worthy of a Peter Luger's hamburger, hold the cheese and order a slice of bacon on the side.......of course Peter Luger does not have 1554 - you'll have to bring it yourself - of maybe for a maven of your stature - they will keep it chilled "just for you!" -
and for an added delight before you leave Brooklyn - visit Dandelion Wine on Franklin - the owner, Lily - is worth the trip - and let her choose for you.
Posted by: la grande poussée | Aug 12, 2008 3:36:18 PM
Price cuts at Starbucks? Ouch. You can bet that their suppliers aren't cutting prices.
What I'm seeing at the grocery store is stable prices - stable, that is, on items that are shrinking in size.
8 oz. yogurt is now 6 oz. That's 33% price increase per unit volume.
Ice cream, already shrunk from half-gallon (64 oz) cartons to 56 oz are now dropping to 48 oz cartons, disguising an overall 33% price increase.
Fish burritos at Rubios are up from a bargain $3.99 to $4.69. That's up 17.5%.
Could it be possible that Americans will be driving less AND eating less? Sell all your healthcare stocks!
Posted by: ottnott | Aug 12, 2008 3:40:11 PM
Here's a nice picture of the S&P 500. You can annotate lines on it. Add resistance at 1315 and support at 1215. If 1215 breaks, the target will be 850 (ouch). Is SBUX still compelling? I've never been compelled to buy a stock anyway.
Posted by: Steve Barry | Aug 12, 2008 3:47:45 PM
I saw a MLS listing were the seller will offer 3% of the selling price as cash for down payment.
Posted by: GB | Aug 12, 2008 3:56:40 PM
I'm curious if the discounting is a result of Starbucks itself is going out of style like seven-passenger SUVs, or if coffee-houses in general are losing customers. And is that because of a weak economy or because the coffee has lost it's fad glamor, though usually there is something to replace it that I just don't see. Hookah bars and micro-breweries are getting more popular, but it's going to be quite a few years before either are pulling in disposable income to the level of coffee houses today.
Seems to me that most (nicer than fast-food) restaurants are discounting just by holding their prices steady. Based on my personal observations, eating out doesn't seem to cost me much more than a year ago, but buying groceries is way up. Perhaps the other discounts aren't so obvious. I don't know about the price of Folgers or the price of wholesale, but the price of (good) beans at the retail market doesn't seem to have inflated as much as food in general. But if Starbucks is discounting their coffee while paying more for their beans, then this seems pretty bad for them.
I have to think that the fading fad factor is the primary thing at work here, not the state of the economy.
Posted by: Brendan | Aug 12, 2008 4:26:09 PM
O.k Barry now I'm irked. As much as I like your writing I can't let this one stand. The problem with this country is not subprime, or Alt-A, or Fannie or Freddie or CDO's or any of it. The problem is simple: we spend much more than we make. The government, businesses, households and individuals. Basically we're addicts. Which is funny and ironic since Starbucks's business model is premised on caffeine addiction. Stop buying that junk! If someone completely rips you off on an item ($4.80) and then lowers the price to the point were it's just a terrible deal ($2.00), it's still a terrible deal.
By the way, if you want to know how Starbucks's stock will do in the future, ignore the yahoos on t.v., the analysts and (especially) the management. Just go into a busy store and see how many dollar bills are in the tip jar.
O.k., I'm done venting. Sorry.
Posted by: Lee | Aug 12, 2008 4:39:56 PM
The best part about brands fiddling with their sizes is (at least in my neck of the woods) they still have to put their unit pricing on the label for comparison shopping.
That, plus the fact that store brands tend to be made by the same producers as name brands sans the logo markup, should be driving folks ever further away from overpriced brands.
Or away from overpriced supermarkups in general, and into Costco or Wall-E Mart/Tarjay...
Posted by: Dr. Kenneth Noisewater | Aug 12, 2008 4:47:45 PM
"practically dietetic at 230 calories."
Get on a stair climber with a calorie counter and 230 will suddenly seem like a ten-course meal.
SBUX will increasingly suffer from its image as a widely-ridiculed metaphor for the last decade's pretentious, conspicuous consumption, and will be lumped together—perhaps unfairly—with giant SUVs, foreclosed McMansions, and Crocs. It will survive because people love coffee, but only in a significantly contracted form.
Posted by: bluestatedon | Aug 12, 2008 4:56:47 PM
as a related aside....
has anyone noticed that their favorite baristas are working fewer hours and replaced with some fresh-faced (and perhaps part-time/ineligible for health insurance) 22-something???
Just wondering aloud if SBUX is assigning more baristas to part-time status to lower wage costs.
Posted by: hello | Aug 12, 2008 5:03:03 PM
Border's books has had super email coupons for much of the past year. If you join their free club, give them your email address and get a membership number and a little card for swiping at the store, they will email you coupons every week or two for 30-40% off a single item.
I even got one for 25% off a single item today, since it'e my birthday.
Interestingly, they offer to send the coupons to your phone so you don't even have to print them.
Posted by: Mike in NOLa | Aug 12, 2008 6:21:02 PM
" It will survive because people love coffee, but only in a significantly contracted form."
It'll do best in stores within walking distance from lots of offices. In that situation, Starbucks doesn't just provide food and drinks, they're a respite from work. It probably doesn't hurt that everyone knows what they sell, making it easy to take orders from coworkers, even visitors from out of town.
The suburban sbux stores in standalone buildings on strip malls will probably go quickly.
Dunkin could probably take Starbucks' place if they created a slightly more upscale variant with fewer donuts on display and with furniture more attractive to office drones. The Dunkin stores I've been in (and worked in in high school) have minimal seating, and are more tuned for serving people to-go orders in quantity during rush periods.
Posted by: Jon H | Aug 12, 2008 6:40:34 PM
If you get a Starbucks Card (like a gift card) then register it online, you get 2 hours a day free wifi as long as you use the card at least once a month.
Which is a good deal indeed.
Posted by: Bob Morris | Aug 12, 2008 7:19:03 PM
Like everything Texan - It took a Texan to call Jimmy Dean Sausage - and tell them he was not happy with the "economic changes"
I wouldn't ordinarily post a youtube - This however is a classic and worthy of Barry's site.
www.youtube.com/watch?v=f4RNb3tt0LM
Posted by: la grande poussée | Aug 12, 2008 7:22:27 PM
All I want is a top notch espresso and an adult atmosphere. Star Bucks does NOT do it and never will. It's for preppy kids with too much pocket money. Mind you I'm in New Zealand so the culture gap is pretty big.
Posted by: Simon | Aug 12, 2008 7:25:41 PM
Just picked up a 2008 Nissan Quest (minivan) for 40% off MSRP. That's the way to move some product!
Posted by: Steve | Aug 12, 2008 7:43:05 PM
How to make a nation morbidly obese in one generation.
Give them desk jobs far enough away they have to drive.
Give them foods with concentrated Calories.
Tell em they deserve to indulge themselves regularly.
Posted by: Bruce | Aug 12, 2008 8:49:37 PM
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